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The article below was published in Agenda,
a Financial Times private subscription service for corporate directors, and is
presented with permission.

Note: Intel Corporation is a
Leadership Supporter of the current Shareholder Forum's
"Say on Pay"
program addressing investor communication issues, and is represented
on that Program Panel by Cary Klafter, referred to below as the
company's executive officer responsible for relevant policies.

Companies are experimenting
with holding their annual shareholder meetings entirely online, but the
movement is attracting backlash from activist investors who say eliminating
the in-person annual meeting will undermine corporate governance.

Intel announced last year that it planned to have a
completely virtual meeting in 2010. But last week the company scrapped those
plans after receiving a shareholder resolution and opposition from activists
who were against the move.

Cary Klafter, Intel’s corporate secretary, says moving
toward an online-only meeting made sense for the company. Only 85 investors
attended the company’s 2009 annual meeting in Santa Clara, Calif. No new
announcements are made at the meetings, shareholder voting is conducted
beforehand, and moving online would save the company money, he says.

Shareholder activists worry that online-only meetings will strip their right
to ask questions of board members and management, present their shareholder
resolutions, file motions on the floor of the meeting, and protest against
the company in a way that draws attention to their cause.

“The opportunity to look face-to-face and engage the board is absolutely
essential to good governance,” says Laura Berry, executive
director of the Interfaith Center on Corporate Responsibility.
The group joined forces with Walden Asset Management to file a proposal
against Intel’s online-only meeting, which has since been withdrawn. Berry
says she supports companies that broadcast their annual meeting online but
doesn’t want new technology to substitute for the physical meeting.

While activists might want the in-person meetings so that they can draw
attention to a particular cause, it’s the protesting and antics that may
induce more companies to move online with their meetings. In 2006, none of
Home Depot’s independent directors showed up to the annual
meeting amid concerns of investor outrage over then-CEO Bob Nardelli’s
pay package. “There is no good purpose served for a few to dominate a
meeting for the purpose of yelling insults and personal attacks that must
simply be endured because responding would be useless,” Home Depot’s lead
director Bonnie Hill told Agenda at the time.
There were reports of individuals dressed in chicken suits carrying signs at
the meeting.

Klafter says in Intel’s case the company had no intent to use the online
meeting to draw down participation from the board. At a minimum the company
was planning to have directors phone in to the online meeting, but the
company was also considering having board members meet at company
headquarters and be on camera. Klafter says sometimes shareholders will ask
questions directed at a specific board member or chair of a committee and
the company wanted that practice to continue during the Web meeting.

Online-only meetings have
their genesis in a revision to Delaware’s corporate law that was made in
2000. This clarified that companies did not have to hold their annual
meetings at a physical location open to investors.

Since then only a handful of companies have jumped on the virtual bandwagon,
but more companies could be joining the ranks. Last year, Broadridge
Financial Solutions unveiled new technology that enables companies
to conduct online-only annual meetings. Intel was supposed to be
Broadridge’s first client for the new software. Broadridge used the virtual
technology to host its own online-only shareholder meeting in 2009. Many
shareholder groups see Broadridge’s entry into this business as an
encouragement for more companies to go entirely online.

Dominic Jones, author of the IR Web Report and an investor
relations expert, says it may not be a smart move for companies to eliminate
their in-person shareholder meetings. “Companies risk giving the impression
that they don’t take corporate governance seriously,” Jones says. In-person
annual meetings are “an acknowledgment of the important role of the
shareowner in the company. That might seem old-fashioned, but making a big
fuss over your shareowners will never be unfashionable,” he says.

There are few statistics on whether online meetings draw more interest from
shareholders than in-person meetings, because so few companies have
experimented with the option. Herman Miller’s last online
meeting, on Oct. 15, spanned about 15 minutes and there weren’t any
questions from shareholders, Jones says.

A Herman Miller spokesman says while that’s true, when the annual meeting
was held at a physical location it was typically short and suffered from low
attendance. “Part of our rationale for moving to [online meetings] is
historically we’ve had very, very low attendance at our physical meeting,”
says Jeff Stutz, vice president of investor relations at
Herman Miller. In fact, Stutz says attendance for the online meeting is a
little bit higher than it was when the company held annual meetings in
person.

Shareholders concerned about this movement are planning to hold a conference
this fall to create standards for virtual meetings that would help safeguard
certain shareholder rights that are recognized during in-person annual
meetings. Intel plans to participate in the conference.

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Publicly open
programs of the Shareholder Forum are conducted for
free participation of all shareholders of a subject
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participant is expected to make independent use of
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participation is considered private unless the party
specifically authorizes identification.

The information
provided to Forum participants is intended for their
private reference, and permission has not been
granted for the republishing of any copyrighted
material. The material presented on this web site is
the responsibility of
Gary Lutin, as chairman of the Shareholder
Forum.

Shareholder Forum™
is a trademark owned by The Shareholder Forum, Inc.,
for the programs conducted since 1999 to support
investor access to decision-making information. It
should be noted that we have no responsibility for
the services that Broadridge Financial Solutions,
Inc., introduced for review in the Forum's
2010 "E-Meetings" program and has since been
offering with the “Shareholder Forum” name, and we
have asked Broadridge to use a different name that
does not suggest our support or endorsement.